Fees to Rise Thanks to Debit Card Fraud – and Congress

The holiday season is great, but come the Monday after all the revelry, i.e. bowl games, 18-hour sales, libations and 4-6 extra pounds, life sort of hits you in the face like a Randy Johnson ice-packed snowball. Whether it is back to school or back to work, think real – not “reality TV” real.

Like turning the calendar to a new year, right on schedule, the electronic “hackers,” i.e. “e- thugs” got active at the end of the year. Now it’s January, so we have to get busy cleaning up the devastation left in the wake of their criminal behavior.

These felons have been busy skimming debit card numbers. “Skimming” is the 2011 fancy phrase used to describe stealing money from your checking account by using technology to duplicate the magnetic strip on the back of your card. It’s a felony when caught, and folks do big jail time for their act(s). The federal authorities are active in pursuing these bad guys and it is our hope that they will be caught and spend next year’s New Year behind bars.

Now don’t worry. SLCCU and every bank and credit union that offers debit cards – that’s pretty much all of us – will give you all your money back. Yes, you are made whole – every cent confirmed to be stolen through fraud will be reimbursed. Based on Visa/MasterCard rules, the financial institution (including us) assumes the full brunt of liability. I’m not complaining; we’re proud to serve our members and appreciate the fact that you and your fellow members trust us enough to give us your hard-earned money.

My frustration, however, is directed toward Senator Dick Durbin and his colleagues in Washington, D.C. What were they thinking when they chose (under the guise of the Dodd-Frank Financial Reform Act) to reduce the income related to what we earn when you swipe your card? This is exactly what we told Mr. Durbin would happen. Crooks don’t care about this “reform” and, as a result, credit unions and banks will continue to be responsible for fraud charges related to “skimming” (among other types of fraud). Those fraud charges will be an expense that historically is paid for from the interchange income – not anymore come later this year!!!

See if this makes sense to you. My guess is that you’ll get it better than the folks in D.C. Consumers are smart. Guess what’s going to happen? Fast forward. Losses mount due to fraud. Financial institutions’ return on the investment for offering debit cards is eroded. Banks and credit unions look for new ways to offset losses. Hmmm…how’s that going to happen? Fees, fees and more fees – yeah, that’s the ticket. But who’s going to pay the new fees? You guessed it – the consumer.

I know I’ve beaten this drum for a number of weeks, but here I go again. Please tell your Senators and Representatives to stop the madness. Senator Durbin is hoping for a perfect world where banks and credit unions’ costs go up, merchant fees decrease, and the result is that consumers pay less at the cash register. Honestly, he could not be more wrong.

Here’s the body of your letter. Please feel free to clip and paste this sample.

Dear Senator:

Debit card fraud is real. It will not stop. Banks and credit unions will charge me new fees because the interchange fees that were used to cover the fraud losses will drop. The merchants will not pass on interchange savings to me at the cash register. I will get “dinged” on both ends. Best I can tell—only the merchants win. Please don’t be naïve. You want economic stimulus? Here’s a stimulus: don’t transfer the costs of debit card transactions from the merchant to me. Own up. You made a bad decision, now fix it.

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Patrick has been employed with St. Louis Community Credit Union for more than 30 years. As a Community Development Financial Institution, St. Louis Community offers safe and affordable loans, second chance checking accounts and branches in underserved areas as part of its overall community giveback. Patrick is proud to be associated with nearly 200 employees who have a laser-like focus on service to our members and the community. Learn more at stlouiscommunity.com